Old fashioned rent control: what is it good for?
27 Sep 2017
Eye-catching retail offers on housing have become a party conference tradition, as much part of the furniture as the stuffy airless room or terrible phone signal.
Today Jeremy Corbyn stepped up to the plate with his.
A centrepiece of this was some intriguing language around rent control. He said:
“And we will control rents…Rent controls exist in many cities across the world and I want our cities to have those powers too and tenants to have those protections.”
This is clearly a play for the hard-pressed private renters that, as we’ve argued before, were so crucial in the Conservatives losing their majority.
The exact detail is unclear, but the language suggested it could go further than what was in the 2017 manifesto.
So is this the right or wrong move?
To make sense of it, it’s worth knowing that there’s two basic ways you can ‘control’ private rents.
The first is essentially capping increases. The landlord is free to set the initial rent but the increases are restricted. This could be done, as we’ve campaigned for, through changing the law to make the standard tenancy a five-year contract where the landlord sets the initial rent but increases are linked to inflation.
It’s this that was in the 2017 manifesto, and indeed the 2015 manifesto (where it unhelpfully gained the moniker of ‘Venezuelan rent controls’, making it sound slightly more dramatic than it really was).
It could make a real difference.
The second approach is indeed more dramatic. It involves completely dictating the entire rent. A local authority, for instance, would tell landlords they can’t charge more than £10 per square metre, or no more than £500 a month for a one bed, and so on. In reality it would force rents down, not limit their increase.
Corbyn has expressed support for this approach before, so it may be where he wants to take things. Or it could be somewhere in the middle.
So what’s Shelter’s view?
Essentially, controlling increases is fine. There’s a variety of ways you can do this, of which the best is probably Labour’s current policy.
But setting the entire rent can cause big problems. And those problems come with big risks that could hurt the people Labour say they care about – those on low incomes.
We’ve looked at this in some detail over the years. There is no crystal clear picture. But the evidence, summarised in the table below, suggests that old fashioned controls – setting the rent, not just controlling the increase – would force a significant number of landlords to sell their home, as they could make more money that way.
Now, that might be good for middle earners – a glut of homes suddenly for sale might become available.
But this is where the risk comes in for low earners. They can’t afford to buy and increasingly rely on the private rented sector. As landlords sell up, they would be left with fewer places to live.
In the absence of a much larger supply of council and social housing, that risks pushing people into homelessness.
This is probably not a gamble worth taking.
A more flexible, local approach might mitigate some of the risks. But we’d strongly suggest that this idea of controlling rents, as it develops, restricts itself to regulating increases.
All that said, it’s no wonder old fashioned rent controls are very popular. People are desperate for big solutions after years of fiddling around the edges by governments of all stripes. One of my main take aways from conference was the disparity of the discussion between the traditional fringe scene and the Momentum-run The World Transformed outside. At the former, well-meaning people talked about big problems but too often pushed incremental tinkering. At the latter, people talked in radical language with bold solutions.
That doesn’t make all those solutions good ideas. But it does lay down a challenge to come up with alternatives on the same scale. This includes the government – if nothing else Corbyn’s speech today has firmly put the ball back in the government’s court.
So in that spirit, here are three alternatives:
- Firstly, end the freeze on housing benefit and re-link it back to rents. This would make an instant difference to those on lower incomes, stemming the tide of families being made homeless after falling on hard times only to find they don’t get enough financial support to keep a roof over their head. The NAO recently pointed this out. But bafflingly it’s a call Labour have still refused to back, including in Corbyn’s speech today, despite spending pledges in other areas.
- Secondly, build a new generation of good quality homes at low rents – both for those at the sharpest end and workers on low wages. This could be council housing or others models, such as living rent. Done well, this would provide a better alternative to the private rented sector for families on all kinds of incomes, rather than tinkering with trying to force for-profit landlords to change their behaviour.
- Thirdly, reform the housebuilding system so it builds more homes people want. This would involve radical reform of the land market. For more see our New Civic Housebuilding work.
All of these are big solutions that would make a difference and send a signal to voters. All of them will help those on low incomes as well as middle incomes. And all of them are a safer bet than old fashioned rent control.